Hong Leong Financial Group’s asset quality and liquidity buoyed by prudent management amid pandemic

Published on Wednesday, 24 March 2021
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Hong Leong Financial Group’s asset quality and liquidity buoyed by prudent management amid pandemic

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Interviewed By Editorial

Hong Leong Financial Group topped the ranking of Strongest Banks by Balance Sheet in Malaysia and ranked 12th in the Asia Pacific (APAC) in 2020.

The group tops the Strongest Banks by Balance Sheet in Malaysia ranking
The group ranks12th in the Strongest Banks by Balance Sheet in Asia Pacific
The group was quick to respond at the start of COVID-19 crisis

26 February 2021, Singapore – Hong Leong Financial Group (HLFG) topped the ranking of Strongest Banks by Balance Sheet in Malaysia and ranked 12th in the Asia Pacific (APAC) in 2020. HLFG and other banks were recognised at The Asian Banker’s Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020. HLFG is an integrated financial services group that provides a broad spectrum of financial services through its operating businesses, namely the commercial banking division, Hong Leong Bank Berhad, the insurance division, HLA Holdings Sdn Bhd and the investment banking division, Hong Leong Capital Berhad.

This is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in APAC, Middle East, and Africa regions.

The ranking is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) in six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity. For Strongest Banks by Balance Sheet 2020, the financial information in the first half of 2020 (1H 2020) was collated and incorporated into the assessment of how banks performed during the COVID-19 pandemic.

HLFG tops ranking of Strongest Banks by Balance Sheet in Malaysia

The group showed excellent performance in asset quality and liquidity indicators. Its gross non-performing loan (NPL) ratio was stable at 0.6%, much lower than the industry average ratio of 2%. Its liquid assets to total deposits and borrowings ratio was above 40%. In addition, the solid results in the areas of capitalisation and profitability also contributed to the bank’s ability to achieve a robust standing in the balance sheet results.

The group maintained stronger liquidity buffers than Public Bank, the second strongest bank in Malaysia. Public Bank recorded a lower gross NPL ratio at 0.4%, but its liquid assets to total deposits and borrowings ratio was only at 18.2%. Meanwhile, the group delivered better performance in asset quality, profitability and liquidity than Maybank, the third strongest bank and the largest bank by total assets in the country. Although Maybank maintained a higher capital adequacy ratio (CAR) at 19% compared to 15% for the group, its asset quality was worse than HLFG. Maybank’s gross NPL ratio stood at 2.5% and had a lower loan loss reserves to gross non-performing loans ratio of 83%.

Tan Kong Khoon, President and CEO of HLFG, in his acceptance speech said, “I see this award as recognition of our dedication to prudent management of the balance sheet, focusing on customer needs and delivery innovation. This is only possible when you manage the business over a sustainable long-term basis. If you are short term, it will be very difficult to manage your situation and come up on the right side during a pandemic”.

The following were especially considered in the evaluation of the banks’ balance sheet strength and resilience: how accelerated digitalisation are enhancing bank balance sheet strength, the impact of debt moratoria, rescheduling and financial aid measures introduced by regulators on bank asset quality, how banks are growing alternative sources of income amid the record low interest rate, and the strategic economic relief and regulatory support in response to the crisis and effect on the pace and scale of recovery.

The group ranks 12th in the Strongest Banks by Balance Sheet in Asia Pacific

With the strength score of 3.76 out of 5, it is the 12th strongest bank out of 500 banks in Asia Pacific. The top 20 strongest banks in the region include eight Hong Kong banks, four Chinese banks, three Japanese banks, two Malaysian banks and one each from Australia, Singapore, and South Korea.

Overall, Hong Kong banks have once again achieved the highest strength score in the evaluation. The weighted average strength score stood at 3.97 out of 5, followed by Singapore banks (3.67), Chinese banks (3.40), and Australian banks (3.36). The 17 Malaysian banks on the list recorded an average strength score of 3.27.

The group was quick to respond at the start of COVID-19 crisis

The group was quick to respond during the pandemic to provide assistance to customers and continues to accelerate growth through prudent financial management, maintaining sound credit discipline and ensuring a diversified funding source.

Tan said, “What was very fortunate for us was that we actually had a little bit of advanced information coming out from China that something has gone wrong. Thus, we were able to very quickly activate our contingency plan and revisit it. By the end of January 2020, I rolled out a 20% work from home and outside the office initiative to test my whole system. When the lockdown came in March 2020, we were all prepared and we flipped it to 80% work from home and 20% in the office. That was really a blessing in disguise. Therefore, to a great extent, we were able to take a lot of initiatives ahead of our competitors”.

For the evaluation criteria and full ranking list of Strongest Banks click here

About the programme

The Asian Banker Strongest Banks by Balance Sheet is an annual assessment of the financial and business performance of the banking industry in the Asia Pacific, Middle East, and Africa regions. The assessment ranks the top performing banks in each country by strength, an evaluation that is based on a belief that a strong bank demonstrates long-term profitability from its core businesses.

The scope and coverage for The Asian Banker Strongest Banks by Balance Sheet come from both the mature markets and the most promising emerging markets in the regions. The focus of the assessment is on commercial banks and financial holding companies with a significant proportion of activity in commercial banking. The assessment does not include central banks, policy banks or finance companies.

The winners are determined using a scorecard approach based on six crucial performance indicators rated on a scale of 0-5: scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity.

About The Asian Banker

The Asian Banker is the region’s most authoritative provider of strategic business intelligence to the financial services community. The Singapore-based company has offices in Singapore, Malaysia, Manila, Hong Kong, Beijing, and Dubai, as well as representatives in London, New York, and San Francisco. It has a business model that revolves around three core business lines: publications, research services and forums. The company’s website is www.theasianbanker.com

For further information, please contact:

Ms. Sue Kim

Marketing Manager

skim@theasianbanker.com

www.theasianbanker.com